Stamp Duties (Amendment) Bill

Mr Louis Ng Kok Kwang (Nee Soon): Madam, this Bill introduce Additional Conveyance Duties for Trust (ACD (Trust)) and stamp duty treatment for the renunciation of interest in residential property held on trust. This will harmonise the stamp duty treatment for equity interests held in trust.

ACD (Trust), along with the introduction of Additional Buyer's Stamp Duty (ABSD) for transfer of residential property into a living trust – ABSD (Trust) – will help to raise tax revenues and go towards stabilising the property market.

I have two short clarifications to raise on this Bill.

First, in determining whether a grantee or grantor is a significant owner of a property holding entity, the new section 23 will take into account equity interests held by an associate of the grantor or grantee.

IRAS has provided on its website guidance on who is to be deemed an associate. This includes parties with an agreement or arrangement, whether oral, written, expressed, implied, to act together to acquire, hold or dispose of equity interest in, or to exercise votes.

Determining the existence of an oral or implied agreement or arrangement is a very fact-specific exercise that can be very time and resource-consuming. It does not seem practical for IRAS to be undertaking such an assessment for every transaction. Can Senior Minister of State clarify under what circumstances will IRAS undertake the process to determine the existence of any oral or implied agreement or arrangement?

Second, my clarification has to do with the related changes to the ABSD regime.

The new ABSD (Trust) will only apply to instruments executed on or after 9 May 2022. It is not intended to apply retrospectively. There may be a case of a discretionary trust with no identifiable beneficial trust that was set up before 9 May 2022 where action was subsequently taken after 9 May 2022 to appoint assets to an identifiable beneficiary or to distribute assets to any identifiable beneficiary.

Can Senior Minister of State clarify if the documents which arise after 9 May 2022 for such a trust is stampable under the new ABSD (Trust) regime? Madam, not withstanding these short clarifications, I stand in support of the Bill.

Mr Chee Hong Tat (The Senior Minister of State for Finance) (for the Deputy Prime Minister and Minister for Finance): Mdm Deputy Speaker, I thank Members Mr Louis Ng, Mr Louis Chua, Mr Leong Mun Wai and Mr Don Wee, for speaking on the Bill and giving their support for the proposed amendments.

Let me address their queries.

Madam, ABSD (Trust) is applicable if the residential property is transferred into a living trust on or after 9 May 2022. This applies for both pre-existing trusts, and new trusts created on or after 9 May 2022. Living trusts are trusts that come into existence during the lifetime of the person who created it. 

Mr Louis Ng and Mr Don Wee have asked whether ABSD (Trust) applies where: the transfer of residential property into a living trust took place before 9 May 2022, which is the effective date of ABSD (Trust); and there is a subsequent appointment or distribution of the property to a beneficiary of the trust on or after 9 May 2022. 

Since the transfer of residential property took place before 9 May 2022, ABSD (Trust) does not apply – including to a subsequent distribution of the property by the trustee to a beneficiary of the trust on or after 9 May 2022. 

Madam, Mr Louis Chua and Mr Leong Mun Wai asked why ABSD (Trust) and ACD (Trust) were not introduced earlier. Before the introduction of ABSD (Trust), transfers of residential property into a trust with an identifiable beneficial owner are subject to ABSD. So, the situation is not entirely as what Mr Louis Chua described and certainly not what Mr Leong Mun Wai said in his speech.

ABSD collected for transfers into trusts where there is an identifiable beneficial owner of the property was not separately tracked before 9 May 2022. It was instead accounted for according to the profile of the identifiable beneficial owner. So, we look at the profile of the beneficial identifiable owner to determine what is the ABSD that is due. 

As I explained in my Second Reading speech, ABSD would not apply before 9 May 2022 for trusts which do not have an identifiable beneficial owner. And this is what the proposed changes for ABSD (Trust) and ACD (Trust) seek to address – to ensure that ABSD and ACD continue to remain relevant as property market cooling measures irrespective of whether trusts are used or not. 

Trusts can be set up for different reasons, including for non-tax purposes such as to provide for charitable giving. They can involve highly complex arrangements. Given the diversity and complexity of trust instruments, we decided to study the proposed changes carefully and do a thorough review, so that we could achieve our policy objectives while avoiding unintended consequences.

I am glad that all the Members who have spoken agree with the proposed changes. This will allow us to move forward to apply the new changes with effect from 9 May in the manner which I described earlier. [Please refer to "Clarification by Senior Minister of State for Finance", Official Reports, 5 July 2022, Vol 95, Issue No 64, Corrections by Written Statements section.] 

It is important for us to also remember that when we implement some of these changes, we also have to bear in mind how they will fit in with our overall system of governance and rule of law. Mr Leong mentioned that we should – if I heard him correctly – retrospectively apply some of these changes to previous transfers, previous transactions. I think it would not be fair or appropriate for us to do that – to apply these changes retrospectively – because this will undermine the rule of law and it would also affect the confidence that the public and businesses have in the certainty that Singapore offers.

Mr Leong also mentioned whether we could refund ABSD only when the creator of the trust or the settler has died, again if I heard him correctly. Madam, we collect fully, upfront, at the point of transfer of the property into the trust. That is what we would do. So, we actually collect the full amount, upfront and we only refund when certain conditions are met, and you would have to apply. So, this actually is even better than what Mr Leong mentioned, which is to only refund when the creator or the settler has passed away.

Importantly, Madam, we also have to take a look at what is our overall tax and transfer system. So, I do not agree with what Mr Leong said that our tax and our transfer system benefits the rich. That is not true.

Overall, our tax and transfer system is fair and progressive and, in fact, the Government has been raising asset-related taxes repeatedly. We did this in Budget 2010, 2013, 2018 and, more recently, in 2022. In Budget 2015 and Budget 2022, we also raised the income tax for higher income earners.

So, overall, our system of taxes and benefits is a fair and progressive one. It is one where everyone contributes but those who have more will pay more, contribute more than what they receive in terms of benefit. It is a fair and progressive system.

Madam, Mr Louis Ng asked about how IRAS determines the existence of an associate relationship between parties with an oral or implied agreement or arrangement to acquire, hold or dispose of equity interests or to exercise votes in a property holding entity. The associate relationship Mr Ng refers to, is part of the current definition of "associates" under the existing ACD regime and it is not an amendment that is being proposed in this Bill.

I had earlier explained that where a trustee holds equity interests for a beneficiary who is not an identifiable beneficial owner of those interests at the time of their transfer into the trust, such a beneficiary is considered an associate of the trustee in determining whether the trustee is a significant owner of the PHE. And this definition of associates will be provided for in subsidiary legislation. 

Let me briefly explain how IRAS will determine the existence of an oral or implied agreement or arrangement. 

Today, if ACD is payable, the grantee or grantor is required to stamp the instrument and submit to IRAS a copy of the instrument and supporting documents. 

These supporting documents include a declaration of associates and the equity interests in the PHE that they beneficially own. And this includes associates who are parties with an oral or implied agreement or arrangement. 

IRAS will conduct a thorough assessment of the documents submitted, including verifying the existence of any oral or implied agreement or arrangement, using a risk-based approach. For instance, IRAS may interview the parties involved. 

Madam, the large majority of our taxpayers comply with stamp duty requirements. We have stringent enforcement in Singapore and there are stiff penalties for tax evasion, whether on stamp duties or other taxes. So, for people who are thinking of circumventing the rules, please do not, because there will be a price to pay when you are caught.  

Mr Don Wee asked how much more the new stamp duties are expected to contribute to Government revenue. Mr Louis Chua also alluded to this in his speech. 

ABSD (Trust), ACD (Trust) and the imposition of stamp duty on the renunciation of a trust property, are not intended to be wealth taxes or revenue-raising measures. Rather, they are part of our residential property market cooling measures. 

We are unable to determine at this juncture the revenue that will be raised from ABSD (Trust), ACD (Trust) and the stamp duty on the renunciation of a trust property as this depends on the extent to which individuals will transfer a property or equity interests in PHEs into living trusts in future. 

Mr Don Wee has asked whether the amendments would apply to a trust created overseas. 

These amendments are applicable to two groups of instruments. First, an instrument executed in Singapore. Second, an instrument executed outside of Singapore, relating to property situated in Singapore, and is received in Singapore. So, this is regardless of whether the trust is created locally or overseas.

Mr Louis Chua asked whether MOF is reviewing the ABSD remission conditions for housing developers.

Madam, the Ministry answered a Parliamentary Question on this in November 2021 and our position remains the same. The three- and five-year deadlines for non-licensed and licensed developers to sell their developments remain relevant to ensure a timely sale of such units to the market instead of keeping them for future sale for possibly higher prices. The deadlines also encourage developers to bid for residential land prudently. The vast majority of developers are able to meet these deadlines.

Mr Louis Chua also asked if the Government would consider a move similar to what was done in New South Wales, Australia, to replace the upfront stamp duty with an annual property tax for first-time home buyers who purchase properties below a certain amount. In this case, it was A$1.5 million. 

According to reports from the New South Wales government, the home ownership rate had declined for each generation since the baby boomers. For example, 60% of people born between 1942 and 1951 owned homes by age 25 to 34. This dropped by 15 percentage points to 45% for those born 1982 to 1991.

So, the context in Singapore is different. Our home ownership rates remain high. About 90% of Singaporean families own their own homes. And there is no ABSD for Singaporeans who are buying their first residential property. 

Importantly, we have good quality public housing which caters to the housing needs of the large majority of our first-time buyers. With subsidies and grants and with mortgage financing provided from HDB, our public housing – HDB flats – remain affordable for first-time home buyers. Close to 90% of first-timer families who bought their flats this year service their housing loans fully using CPF, with no cash payments.

So, it is important for us to bear in mind the differences in our context and our situation, when we consider whether we want to adopt ideas and practices from overseas jurisdictions. Their policies are designed to tackle their challenges, which may not be the same as what we face in Singapore.  

Finally, Mr Don Wee asked about the expected impact on Singapore as a wealth management hub. 

ABSD or ACD already apply to purchases of residential properties in Singapore or transfers of equity interests in property holding entities, as part of our property market cooling measures. The proposed amendments in this Bill are to ensure a fair and consistent tax treatment when such purchases or transfers are made through trusts.

We do not expect ABSD (Trust), ACD (Trust) and the imposition of stamp duty on the renunciation of a trust property to affect Singapore's position as a wealth management hub. Mdm Deputy Speaker, I beg to move. 

Source: Hansard